The Effect of Discount Commissions on the Sale of Your Home 1 - Discount agents need to work with more people to make a living so they cannot provide you with the same attention that a full service broker can give you. 2 - Discount agents cannot expose your home in the same way a full service broker can when it comes to marketing because their marketing budget is hampered by their lower fee. 3 - When a buyer does make an offer, the discount broker has every incentive to coerce the seller into accepting the offer quickly in order to move on to the next deal. They are also less likely to have the negotiating skills necessary to command a higher price for your home as evidenced by their inability to negotiate on their own behalf. Remember if they gave 17% to 33% of their own money away in order to get your business, do you really believe they are going to fight to make you more money when they are negotiating on your behalf? This leads us back to the five assumptions from the beginning of the article: 1 - All agents are the same - All agents are not the same. There is a wide range in the level of knowledge, skill, and experience that agents possess and the quality of service they provide. Even agents who have a great track record for selling homes may be discounting the commission and the quality of service in many of those sales 2 - The home will sell itself - Homes do not sell themselves, though they did sell quickly in the hyper-market of the spring of 2004. Keep in mind that getting the highest price possible is not a given and an accepted offer is just the beginning of the sales process. Having an experienced agent represent you through the escrow process is critical in today's market to avoid the many complicated legal pitfalls of this litigious society. 3 - The price will be the price - There is not one price that any given home will sell for. The final sales price is directly influenced by the negotiation process and the skill of the person representing you. If an agent can't negotiate effectively on their own behalf, why trust that they will get you the highest price possible on the sale your home? Having an agent who knows which buyer to work with in multiple offers is also essential to a successful closing. 4 - The property will get the same exposure - Marketing is a function of time, energy, and resources. Discount agents feel a certain pressure in each of these areas. As mentioned above, a discount agent is hoping for a quick sale so they don't have to carry the listing for long. Once a property goes beyond a 2 week marketing window a discount agent becomes limited in their marketing effort due to their reduced fee. Also a listing offering a lower commission to the selling agent will not get the same volume of traffic as listings offering a full 3%. The amount of money that a seller offers agents as an incentive to bring their buyers directly affects how much viewing traffic the home will see. Remember an agent representing a buyer gets a 17% higher commission on a 6% listing vs. a 5% listing and a 33% higher commission on a 6% vs. a 4% listing. Since most buyers' agents only represent 4-6 buyers per year they are looking to make as much as they can on every sale they make. The 17% differential is very significant to these agents. 5 - The service will be the same - The level of service can differ tremendously between a discount agent and a full service agent. Keep in mind that the most important process of selling a home really begins with the escrow. It is crucial that your agent can handle the legal end of the transaction to ensure a smooth and uncomplicated escrow. The worst thing that can happen is for your home to fall out of escrow because your agent didn’t handle things correctly. Remember also that the discount agent must do more transactions per year to stay even. This means they don't have the same amount of time, resources, and money to make sure the sale of your home runs smoothly and closes in a timely fashion.
The truth is that choosing the right agent in this market is very challenging as the competition for your business always increasing. This ultimately works to your advantage as the seller but there are several traps to avoid when selecting a Realtor. |
